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Monday, March 6, 2017

Our $1,000 financial setback

My family
just suffered a $1,000 setback. Here's
what happened:

Last week, I
was slowly backing the car out of the garage and onto the street. One of my neighbors was driving extremely fast down the road. The other driver tried to swerve out of the way but could
not do it in time, and we collided into each other.

As soon as
our cars crashed, my first thought was about my son; he was in the back seat of
our 4Runner, strapped into his car seat.While the sound of the crash was pretty loud, the impact barely moved
our car.My son was fine, happily
flipping through a book he was looking through as I was backing out onto the
street.My second thought was about the
occupants in the other vehicle.I quickly
went to check on them.I was glad to see
that everyone was fine.There were no
injuries and no air bags went off.However, the other car had quite a lot of damage where our cars hit each
other.

My neighbor
was very nice about everything and we had a nice chat. We exchanged our
licenses and vehicle insurance information (we both had GEICO auto
insurance).When I called GEICO, a
representative explained to me I was likely going to be found 100% liable for the accident since a
car already driving on the road has the “right of way.”She told me “it doesn’t matter how fast a car
is driving down a street, a person backing up into oncoming traffic has to
stop.”

I didn’t
want to accept fault completely without at least trying to dispute the
charge.Our home driveway has kind of a
blind corner for incoming traffic. That's
why I always back out extremely slowly whenever leaving the house.I gathered and sent several photographs of my
neighborhood and even used images from Google
Maps to demonstrate the blind corner for oncoming traffic to my insurance
adjuster.I wasn’t trying to prove that
I was not at fault at all for the accident, but I was hoping that the adjuster
would side with me and conclude that maybe
I was only 50% or 75% at fault.

After a day,
GEICO still held me 100% liable for the car crash.The rep reminded me that if I wanted to get
our vehicle repaired, we would have to pay out a $1,000deductible.Ouch!After getting off the phone, I immediately felt a rush of emotions hit
me like a punch to the face.

I felt anger
at how stupid I was to not back out more carefully.I felt annoyance towards the other driver for
driving too fast down the street. I felt regret for increasing our deductible
to $1,000 instead of keeping it at $500.We have a great rate on auto insurance currently ($596 per 6 months for
2 insured vehicles).My pride was
hurt.Then I started thinking about all
the things that we could do with $1,000: invest it in index funds, go on a week
long vacation, put it in our savings account, contribute more to our son’s 529
college savings plan, or donate to charity.There were so many great options for spending $1,000 compared to using
towards a deductible towards repairs.

After a day
or two of feeling upset, I finally accepted the $1,000 setback.A few glasses of whiskey definitely helped☺. I’m glad that no one was hurt.Although I spent quite some time cringing about it, I realized that
there was nothing else that could be done.The crash happened, and it was time to move on.Spending anymore time dwelling on the details
would just be a waste of my imagination.We do have a very healthy emergency fund, and $1,000 is not a lot in the
grand scheme of things.It’s less than
0.1% of our net worth.We make over $1,000
a month consistently in side hustles.While this is a minor financial setback for us, the cost of repairing
our vehicle out of pocket would have far exceeded our deductible.I’m glad our car is fully paid off and we
don’t have any monthly auto loan expenses.

2017 has
started off as a good year with our spending cut back considerably and both of
us receiving nice salary increases.We
are still on track to save a ton this year, and this helps us handle thousand
dollar setbacks without too much stress.If this accident happened many years ago when we were living paycheck to
paycheck, then we would have certainly gone into credit card debt for this.

I have
already changed my deductible to $500; it's only an increase of $43 for a
6-month period to cover both of our vehicles. Psychologically, a $500 deductible is less
upsetting than a $1,000 deductible.My
wife and me have now agreed to ALWAYS reverse park our cars into the garage and
so we will be forward facing when exiting our driveway. This will never happen
again. Lesson learned.

On a side
note, now that we are reverse parking our vehicles, it reminded of this
interesting discussion I heard on NPR radio years ago titled “Parking
behavior may reflect economic drive.”Drivers who took “elaborate effort to wiggle in [to] reverse” park their
vehicles delay their gratification.When
they “back in and pay the price at the beginning, [they] don’t have to wiggle
[their] way out when they leave.”One
researcher actually found a correlation between parking behavior and economic
growth rate.In China, 88 percent of
cars are parked reverse.In the United
States, it’s less than 6 percent.All I
know is that heading out of the driveway in the morning is much smoother (and
safer).

Having an
adequate emergency fund makes sure that thousand dollar setbacks aren’t
financial emergencies. Back to saving and investing more.